Councils with about £1bn ($1.5bn) tied up in Icelandic bank accounts are optimistic about recovering their investments through the winding up of the banks.

Administrators for Heritable Bank, the UK arm of Landsbanki, have signalled that creditors will recover up to 80 per cent of funds, amounting to about £300m. This has given local authorities confidence that they will reclaim the “lion’s share” of investments in other failed Icelandic banks.